Here’s Why PH’s World Competitiveness Ranking Plunged the Most in Asia

The Philippines ranked 50th in a list of 63 countries in the latest World Competitiveness Yearbook by Swiss-based business school International Institute for Management Development (IMD).

That represented a drop of nine places from its rank of 41st in 2017, and it was highlighted as the biggest drop experienced by an Asian country in the rankings. The Philippines is now the lowest ranked Southeast Asian country among the five included in the rankings as well as the second lowest among the 14 Asia-Pacific countries in the list.

“The reasons for such a drop include a decline in tourism and employment, the worsening of public finances and a surge in concerns about the education system,” wrote IMD in a press release.

In a policy brief sent to media last May 24, the Asian Institute of Management (AIM) Policy Center, the local partner of IMD, discussed the causes of this big drop. Each country is ranked according to four major factors—economic performance, government efficiency, business efficiency and infrastructure—and the Philippines saw declines in all four.

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The country saw the biggest drop in economic performance, dipping 24 places down to 50th. Much of this was attributed to a large drop in country rankings for employment, where the Philippines now ranks 32nd after placing fourth last year.

“This drop was due to a slight increase in unemployment rate and a slight decrease in the number of employed and the size of the active labor force,” wrote AIM in the policy brief. Data from the Philippine Statistics Authority show that unemployment rate stood at 5.3 percent in January 2018, rising from 5.0 percent in October 2017, while employment rate decreased by 0.3 percentage points to 94.7 percent.

Other indicators influencing the drop in the economic performance rank include the depreciation of the Philippine peso, increased inflation, lower rate of growth in foreign direct investment inflow, low GDP per capita and low domestic savings rate, according to AIM.

Both the business efficiency and government efficiency factors experienced smaller but still significant drops in rankings, with the former declining 10 spots to 38th and the latter dropping seven spots to 44th.

AIM noted that many of the drops within these two factors were on perception-related indicators—while two-thirds of the indicators used to determine the ranking are derived from statistical data, the other factors are based on a survey that examined the perceptions of over 6,300 individuals with corporate managerial positions.

“This suggests that deteriorating perceptions also played a significant role in the Philippines’ overall decline in ranking,” said AIM.

The fourth factor, infrastructure, experienced the smallest decline in rank from 54th to 60th, but it is also the lowest-ranked among the four, a trait that AIM says has been consistent for several years. AIM highlighted basic infrastructure, scientific infrastructure and education infrastructure as the three lowest ranking sub-factors under this indicator.

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The US ranked first among the 63 countries this year, rising from fourth in 2017 and replacing last year’s leader, Hong Kong, which now ranks second. Completing the top five are Singapore, the Netherlands and Switzerland, which were also the top five countries in the previous ranking.

Published since 1989, the World Competitiveness Yearbook measures the competitiveness of several countries based on 340 economic, social and political indicators. Ranking these indicators is based on macroeconomic data sourced from its 55 partner institutes, such as AIM’s Rizalino S. Navarro Policy Center for Competitiveness in the Philippines, as well as the Executive Opinion Survey.

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